Corporate Finance & Planning Insights for Multi-Generational Family Businesses
This week, we welcome Tim Lee to the Family Business Director blog. This post originally appeared as an article in a recent Mercer Capital publication, The Transaction Advisory Update. Many family businesses will find the post interesting because it provides touch points and practicalities for identifying viable merger and acquisition targets and assessing strategic fit.
While there are likely dozens of lessons to be learned from Publix, family business owners and leaders should consider three areas key to Publix’s success over the last 90 years: long-term planning, smart diversification, and strong family culture.
Barring a change in the economic backdrop, the availability of debt financing for most family businesses in 2022 should be good; however, the cost of borrowing probably will rise in 2022. Market participants are highly certain the Fed will raise short-term policy rates to address high inflation that massive growth in monetary aggregates since March 2020 unleashed on financial markets initially and now the broader economy.
As 2022 kicks off, tax policy largely remains unchanged from a year ago. President Biden’s Build Back Better Act went through numerous iterations over the year and was politicked down from a headline program cost of $3.5 trillion to $1.7 trillion before ultimately being kiboshed by Senator Joe Manchin in late December.
But where does that leave estate planners and family businesses? There are three things estate planners and business advisors need to keep top of mind regarding tax policy in 2022.
Our family business clients naturally want to know what their business is worth today. But an even better question asked by many of them is what they can do today to make their family business more valuable tomorrow. While the specifics of value creation are unique to each business, we like to use a common framework to help our clients identify pathways for creating value.
We present key elements of this framework in this week’s blog post, to get your family business ready for 2022.
For most of us, Thanksgiving is a time to disregard normal dietary restraint in the company of extended family members that one rarely sees. For some enterprising families, however, Thanksgiving quickly devolves from a Rockwellian family gathering to a Costanza-style airing of grievances. So, in the holiday spirit, we offer this list of the top ten questions not to ask at Thanksgiving dinner. If you have trouble distinguishing between the board room and the dining room, this list is for you.
Numerous changes lurk in the current reconciliation bill snaking its way through Congress and it could have major ramifications to the estate plans you worked up just a few years ago.
In this post we briefly touch on planning vehicles and structures as well as valuation tools currently being debated in the reconciliation bill and why they are important to many family business owners and advisors.
Don’t read this book if you run a family business that is flush with cash, growing like a weed, regularly enjoys drama free family dinners, has their succession plan for your grandchildren in order, and do not foresee any disruption to your business over the next few generations.
Assuming the above does not describe you perfectly, the Harvard Business Review | Family Business Handbook by Josh Baron and Rob Lachenauer is a comprehensive and useful tool for anyone involved with or working in their family business.
It was “leaked” last week that the Biden administration is planning to nearly double the federal capital gains tax rate on taxpayers earning more than $1 million from 20% to 39.6%. In states with high taxes, the combined blended rate could top 50%. This week we discuss the capital gains tax and provide some helpful reminders for family business owners.
Late last month, Family Capital released its third annual ranking of the world’s largest family businesses, the Family Capital 750. As the name suggests, the list includes 750 global family businesses with 2019 revenue ranging from $2.7 billion to $514 billion. in this week’s post, we share what we found when we scrubbed the data.
Family Business Director is excited to be a sponsor of this week’s Transitions Spring 2021 conference produced by Family Business Magazine. The theme for the conference is “Building the Future Family Business.” The conference offers a wide range of sessions in support of that theme. Additionally, we are looking forward to leading a breakout session on Wednesday (12:10-12:50 EDT) on the role of diversification in the family business.
Atticus Frank, senior financial analyst, worked in his family’s business for nearly three years prior to returning to Mercer Capital and joining the team’s Family Business Advisory Group. In this post, he writes about the stressful introduction to his family’s business and the steps he took to foster a healthy relationship with the business.
Family business directors generally take the long view relative to their publicly traded counterparts, providing a reprieve to constant market updates and daily market volatility. Successful family businesses plan for the next generation, not just the next quarter. However, family businesses cannot simply put their heads down and ignore economic trends outside their family’s industry.
How does someone align the goals of the family with their business? This post looks at a few practices I picked up in my family’s business, and ones we still practice.
Barring a change in the economic backdrop, as uncertain as it is, the availability of debt financing for most family businesses in 2021 is good. Further, the cost of credit will be low and most likely the terms will be lenient by historical standards.
In this week’s post, we conclude our series on taking a year-end strategic inventory in your family business. Family business directors and managers need to think like a chess player when thinking about different business units within the company. What are they capable of individually, and how do they work together?
Last week, we introduced a series of posts about taking a strategic inventory of the assets of your family business. As the calendar turns to December and 2020 (thankfully!) comes to an end, it is an appropriate time for family business directors and managers to take stock of just where their family business is at this stage in the pandemic. Doing so can help give needed context to discussions about where the family business should be headed.
We tend to think of a family business’s primary assets under seven broad headings. In this week’s post, we offer a checklist for directors and managers.
As the year winds down, we recommend setting aside time to look beyond survival tactics and re-engage in some strategic thinking about your family business. Much like an asset manager would review the portfolio they have constructed with their client, family business directors should review the current asset allocation in their family business. Doing so can help uncover fresh insights and challenge conventional thinking that is due for an update.
For most of us, Thanksgiving is a time to disregard normal dietary restraint in the company of extended family members that one rarely sees. For some enterprising families, however, Thanksgiving quickly devolves from a Rockwellian family gathering to a Costanza-style airing of grievances. So, in the holiday spirit, we offer this list of the top ten questions not to ask at Thanksgiving dinner. If you have trouble distinguishing between the board room and the dining room, this list is for you.
For public companies, today’s almost endless supply of cheap capital (as evidenced by the proliferation of special purpose acquisition companies, or SPACs) is a boon. The low cost of capital makes it easier to justify investment opportunities financially, and investors are willing to provide capital in search of higher returns. For many family businesses, however, the era of cheap capital may not be an unqualified good.
Buy-sell agreements don’t matter until they do. When written well and understood by all the parties, buy-sell agreements can minimize headaches when a family business hits one of life’s inevitable potholes. But far too many are written poorly and/or misunderstood. Directors are always eager to discuss best practices for buy-sell agreements.
Excerpted from our recent book, The 12 Questions That Keep Family Business Directors Awake at Night, we address this week the question, “Is there a ticking time bomb lurking in your family business?”
Communicating risk effectively is a challenge for all companies. Making too much of the risk can alienate customers and erode the credibility that might be critical when a threat actually materializes. On the other hand, insufficient risk disclosure can result in liability that threatens the company’s existence. A recent article in the Harvard Business Review addressed this challenge in customer communications. The authors of “The Art of Communicating Risk” offer three suggestions for communicating risk to customers more effectively. In this post, we will review those suggestions, and think about how they might apply to communicating risk to family shareholders.
As we noted in last week’s post, directors should take this economic opportunity to think more broadly about the portfolio of assets owned by their family business. Are any pieces extraneous? Are there any pieces that are missing? For family businesses that have hesitated to make acquisitions in the past, the missing pieces do not have to be big, nor do they have to be existing competitors. In this week’s post, we offer five categories of targets we think would be helpful to expand your list of potential acquisition opportunities.
Family directors have rightly been focused on keeping their people safe and healthy, and taking the steps necessary to help their businesses survive the pandemic. It will eventually be time to look ahead, however. When that time comes for your family business, what will you be thinking about?
